Fifty58 is a new mixed-use development in Paramus, NJ – a place some might call the shopping mall capital of the world (or at least it feels like that to those of us who grew up nearby!). But it was a project that almost never was until a successful rezoning effort that allowed, for the first time, residential uses in areas that had previously been zoned strictly for commercial activity (according to NorthJersey.Com). When completed, the project will include 45 residential units (four of which will be designated as affordable housing. reflecting a 10% set aside) and 7,000 sf of retail space on the ground floor – all occupying the site of a drive through bank and gas station.

The process, discussed here, took over a year and included negotiations between elected officials over the percentage of affordable housing (some requested a 20% set aside). The new zoning enabled the developers of Fifty58 to advance a project that would have been impossible under the previous zoning framework. And therein lies the lesson. As developers increasingly pursue and invest in multi-use development, public sector partners will continue to be critical partners in the redevelopment process. And the public sector and community partners will need to anticipate the need for these changes if they want to sustain economic growth. This challenge will be particularly critical in communities that have abandoned or aging shopping centers in need of redevelopment.

A googlemaps image from October 2018 shows the construction of 58 E Midland Avenue is well underway.

In case you haven’t heard, the Opportunity Zone is a tax incentive that was passed as part of the Tax Cuts and Jobs Act of 2017. Opportunity Funds created in these zones allow investors to defer federal taxes on any recent capital gains until December 31, 2026, reduce that tax payment by up to 15%, and pay as little as zero taxes on potential profits from an Opportunity Fund if the investment is held for 10 years (Read more in a previous blog post). The tool could potentially help rebuild distressed and low-income communities around the country, if used cautiously and intentionally. So far, the tax breaks for certain investments in designated census tracts has already led to the creation of nearly $1 billion in new funds. The Treasury Department expects an overall $100 billion in private capital will be deployed through the tool.

As with various other tax incentives, the key ingredient to the successful investment of Opportunity Funds in our neighborhoods will be the core mission driving those investments. Without the right mission and goals guiding the investments, Opportunity Zones may become inequitable places that end up displacing existing residents, businesses, and jobs. In New York, there is already fear rising from Opportunity Zones being located in relatively posh, or gentrifying, neighborhoods “with projects from sponsors better known for luxury skyscrapers than affordable housing”.

We need local community groups, philanthropic foundations, and mission-driven organizations to steer the efforts in Opportunity Zones, with clear action plans and strategies.

To achieve this, city governments and community-based organizationsare working with third-party, independent advisors who can help prioritize projects and provide market expertise. The California Opportunity Zone Partnership, organized by non-profit Accelerator for America, with partnership of the State of California, Energy Foundation, Cities of Oakland, SF, San Jose, and LA will be doing exactly that by providing grants and technical expertise to three small-to- medium-sized California cities to help them attract inclusive investments into their Opportunity Zones. In Louiseville, KY, Accelerator for America has already supported the city to engage a consultant to create a replicable product—an Investment Prospectus—to enable the city to communicate its competitive advantages, initiate local partnerships, and identify sound projects that are ready for public, private and civic capital.

Here at Larisa Ortiz Associates, we conduct similar work in mixed-use urban places, often times located in Opportunity Zones, to help municipalities prepare an actionable and market-based investment prospectus that help guide private investment. As part of our SMAR2T Approach, we carry out comprehensive market analyses that account for challenges and opportunities in the physical environment, business environment, local administrative/ regulatory framework, and demographics.

The time is now – opportunity funds have 31 months to deploy the capital and investments need to be made by the end of 2021 to qualify for the minimum incentive to reduce their required 2026 tax payment (investors get a step-up in basis only if opportunity fund shares are held for at least five years). And to qualify for the full seven-year tax break (15% off tax bill), investments will need to be made by the end of this year!

If your city or neighborhood is looking to prepare a mission-driven and market-based investment prospectus for Opportunity Zones, get in touch with us!

The mobility revolution is in full speed, and everyone is working on finding ways to prepare, mitigate, and respond. The way we travel will change dramatically over the next few years. Click the links below to read top news articles and stay informed on the topic!

Despite the growth in alternative modes of transportation, our cities still struggle with unequal representation in the field of transportation itself and are therefore creating transit systems that fail to serve all riders. A new study reveals that women only represent 15% of the transportation workforce. It also found that “women are roughly half as likely as men to take advantage of new transit lines, in large part because of a concern for personal safety”. A similar occurrence can be seen with the unequal representation of ethnic minority groups in the transportation industry. Despite the fast growth in cycling among Hispanic, African-American and Asian-American riders, minority neighborhoods have seen fewer investments in bike facilities and continue to face higher risk of accidents and crashes.

As our cities continue to balance the design of streets for diverse users (e-scooters, bikes, autonomous vehicles, buses, etc.), let’s remember to inform ourselves with data and measure the effectiveness of our decisions.StreetLight Data Inc., debuted a new tool that will measure vehicle, bike, and pedestrian traffic without the use of physical sensors. StreetLight Data collects location data from more than 70 million devices in the U.S. and Canada and is able to ascertain the real-time location and movement of approximately 20% of an area’s traffic, and project congestion, directional flows, and origin/destination information.

And finally, the most recent of all micro-mobility developments!The sit-down electric scooter. A new company, OjO launched the scooter share in Austin and hopes to expand to other cities in the U.S. We’re keeping our eyes peeled to see how this will change mobility for groups with disabilities and Baby Boomers.

What are food co-ops?

A food co-op is an enterprise that is voluntarily-owned and jointly-owned by shoppers. The mission of food co-ops often include 1) closing the gap on fresh food access, 2) providing affordable and healthy food, 3) creating jobs and 4) opening up opportunities for farmers to sell produce locally. Given the democratic model of ownership among members, food co-ops, unlike regular retail grocers, are often socially-driven and not simply focused on turning profits.

Neighborhoods that have, in recent years, established food cooperatives have done so as a result of large grocery store closures. Often, grocery stores close because sales are low and not driving profit. In previous blog posts, we’ve discussed the typical site requirements for regional and national chain grocery stores, which include high sales expectations (around $6.2 million annually) and high average daily traffic (upwards of 20,000 vehicles daily). In lower income neighborhoods, these numbers can be extremely difficult to come by (especially in urban areas where car ownership is lower) resulting in closure of anchor grocery destinations.

While food cooperatives may appear to be successful grassroots efforts that meet the needs of local communities, more often than not co-ops have to struggle before being successful, or may fail altogether.

Lessons Learnt

Financing

Typically, cooperatives are financed through a mix of member-owner equity, loans, and grants. However, loans are hard to come by for such projects. Commercial lenders are still not willing to take the risk in offering loans to cooperatives, especially in communities of color. So, the next best thing is to rely on grants from philanthropic organizations and charitable funders – particularly those seeking impact investments. In Flint MI, for example, the planned North Flint Food Co-op has been heavily supported by several charitable funds including the Ruth Mott Foundation who provided over $230,000 in the early site stabilization phases, the Charles Stewart Mott Foundation, and finally the Michigan Good Food Fund – that is also supporting the Detroit Food Commons co-op in Detroit –(consisting of Capital Impact Partners, Fair Food Network, Michigan State’s Center for Regional Food Systems and the Kellogg Foundation).

Competition from large grocery stores in the region

Even if your neighborhood is a food desert and residents don’t have access to fresh food within a mile, chances are they are already making the effort to travel farther distances to get to a national grocer that is able to meet all their shopping needs. These grocers likely offer lower prices that will be hard to beat in a cooperative model with small product orders.

Some ways that co-ops can cut inventory costs, in order to slash prices for consumers, is through building strong and transparent relationships with local farmers and producers (hanging out at farmers markets can go a long way), making special arrangements with wholesalers, or pooling with other local delis/ restaurants who similarly only need to stock their storefronts with small orders of fresh produce.

Changing Consumer Habits

Likewise, if the competitor grocer is located a little farther away from your district or neighborhood, and shoppers have grown accustomed to traveling for their goods, it may be difficult to change their habits.

Take the time to conduct extensive community outreach and engage with local shoppers and potential members of the co-op from the get-go. After all, the local residents will make up the core customer base and will need to be fully supportive of the project. To garner sustained interest, co-ops have often advertised at local houses of worship, community health centers, and other heavily-trafficked locations in the neighborhood to do outreach. It also doesn’t hurt to have well-liked local leaders back the effort to open a co-op.

Reducing Food Waste

Like traditional grocery stores, there is often food waste at cooperatives. If we borrow the rapidly growing trends among larger grocery stores to reduce this waste, co-ops should also be donating scrap produce to food rescue organizations, or back to farms (to feed their animals with), or turning scraps into dishes for hot food bars – just like Whole Foods.

Given that many co-ops like the soon-to-be-built Detroit Food Commons will feature community kitchen facilities on-site, turning scraps into dishes for hot food bars may be a very viable solution to food waste.

Sustaining the Site

In the long term, like many other commercial endeavors, co-ops need to ensure that the revenue stream is diverse enough to ensure sustainability of the business. In order to monetize the property or building that houses a new co-op, we need to think about complementary tenants that can generate additional income/rent to subsidize the operations of the co-op.

Let’s think about potential itineraries for a shopper heading to a co-op.

Itinerary A: I’m heading to the grocery store as part of my weekly run for convenience goods for a family of four.

Itinerary B: I just finished working out at the gym and I’m heading to the grocery store with my healthy meal plan and wellness mindset

In Dayton OH, for example, the Gem City Market co-op has created a diverse program for the site, which will include a cooking demonstration area, a community room, a health clinic, and a café serving freshly-made pastries.

In some cases, partnering with an affordable housing/ mixed-income housing developer might be appropriate, especially since having residents above the store or across the street in a mixed-use development scenario can create constant foot traffic and built-in demand for the co-op. The Detroit Food Commons, for example, is partnering with non-profit developer, Develop Detroit who will be building 65 residential units in conjunction with the cooperative project.

Displacement/ Gentrification

Finally, there always seems to be the fear of gentrification, or displacement, once a co-op has opened. Co-ops, unfortunately, have a bad rep in some regions of attracting yuppies shopping for organic and local produce. The truth is, like any retailer, to make enough revenue, a co-op will need to be able to cater to shoppers of multiple income brackets with various levels of disposable income. More customers means more money that can be poured back into the products and services provided.

However, this doesn’t necessarily mean that the co-op needs to throw away its social mission of being able to close the gap on fresh food access for lower income, minority groups; creating local jobs and circulating wealth within the community. More successful co-ops balance the social mission and the fundamental business requirements (i.e. revenue) by partnering with local organizations that hold community events and programs in the co-op space, and by building in strict member rules that necessitate member co-operation which then builds an intangible connection between members.

Our recent work in West Hartford, CT has served as a reminder of the positive role that enlightened property owners can play in improving downtown retail environments. In our research, we came across an older article memorializing the life of Richard Mahoney, otherwise known as “Mr. West Hartford Center”. For those unfamiliar with West Hartford Center, it is the historic downtown of the community of West Hartford, surrounded by walkable, dense residential neighborhoods that continue to attract people looking for small town living. (I think of places like West Hartford when naysayers say that millennials are moving to the suburbs when in actuality they are moving to towns like this which offer the best of urban living in what are typically categorized as “suburban” environments, yet are anything but!).

Robert Mahoney’s efforts to revitalize West Hartford include lessons and best practices that still resonate with us today. He utilized quite a number of shopping industry tricks of the trade. For readers of this blog, you know that we firmly believe that downtown environments need to be managed in ways more akin to shopping centers – and we love finding examples of how this can work in downtown environments.

Back to Mahoney, here are a few examples of what he did to enliven the downtown according, taken (mostly) from an article in The Hartford Courant. We loved that these interventions aligned so well with our SMAR2T framework, so we took the liberty of organizing the elements of Mahoney’s approach along those lines.

Mahoney supported growth in local Administrative Capacity

Early on he realized how critical a viable merchant’s association was to overall revitalization efforts and required his own tenants to join the Chamber of Commerce and the Merchants Association. He also asked other landlords to match their tenant’s contributions to these organizations.

Another key element of Administrative Capacity is leadership – and Mahoney’s leadership and advocacy was clearly instrumental in advancing some of the initiatives outlined here. In our experience, having someone like Mahoney, who is able to build coalitions and strike compromise and who has the confidence of stakeholders from both the public and private sectors, is key to advancing many revitalization efforts. A great leader is someone who is pretty good at herding cats, and it seems that Mahoney had that quality.

Encouraged on-going Redevelopment in both the Public and Private Realms

Landlords were encouraged to maintain and refresh their stores regularly to keep them from looking dated. In the retail industry we call this redevelopment or repositioning. Malls typically do a refresh every ten to fifteen years or so to stay competitive and current.

Investments were made in holiday lights and decorations, as well as planters on public sidewalks (that were watered!)

While the article failed to mention Mahoney’s role in the shared parking lot to the rear of the stores, which required complicated easements and land swaps to allow for access and municipal maintenance, it probably wouldn’t be a stretch to suggest that he had something substantial to do with it. We believe this shared parking initiative helped ensure that parking supply was sufficient to meet demand. Frankly, we were a bit surprised that parking woes did not come up first among local business concerns as parking is typically the number one issue that drives business complaints.

Promotion and Marketing Efforts to drive Retail Sales

Holiday television advertisements helped raise awareness of the district

Evening shopping hours

Improvements to Tenant Mix

Mahoney was selective in filling vacancies – sometimes choosing to leave a space vacant until the right business came along. (This is notable for communities looking to institute vacancy penalties. Sometimes vacancies are necessary in support of longer term goals).

While Mahoney came to see the value in restaurants, he initially believed that too many restaurants decreased retail traffic. He discouraging landlords from allowing more than one food establishment per property and also once turned down a Starbucks because he thought it would compete with another cafe in the downtown. He didn’t like banks or financial companies because of the “boring face” they offered to passersby.

Putting it all together, this was quite a comprehensive and well thought out effort to revitalize the downtown and by every indication it worked extremely well. Today West Hartford supports over a hundred retail and service-oriented businesses and continues to pull visitors from throughout the region. It maintains strong retail leasing fundamentals (low vacancy rates and high rental rates) and a good mix of both national chains and mom-and-pop stores. As a subconsultant to FHI, the planning firm leading an update of the town’s Plan of Conservation and Development, we are thrilled to play a role in developing the market research and planning tools that will help ensure that West Hartford Center sees another decade of success. As we develop strategies for the next ten years, you can rest assured that the legacy of Robert Mahoney will continue to guide our efforts.

Larisa Ortiz Associates is a full-service retail planning firm. For more information on how we can help your downtown or mixed-use development, please contact us at info@larisaortizassociates.com or call us at 718-205-5116.